EV supply chain too costly, long and unreliable – Electra Battery Materials CEO

➤ Canadian refining company Electra Battery Materials Corp. plans to build a park near Toronto to produce refined cobalt and nickel, and to recycle batteries.

➤ The globalized electric vehicle supply chain has become too long, costly and unreliable, according to Electra Battery Materials President, CEO and Director Trent Mell.

➤ Localizing battery metals refining and precursor materials manufacturing in North America could help make the electric vehicle boom more sustainable, Mell said.

President, CEO and Director of Electra Battery Materials Corp. Trent Mell Source: Electra Battery Materials Corp.

Electra Battery Materials is evolving from a pure-play cobalt producer into a company that also refines nickel and recycles battery materials for the fast-growing electric vehicle sector.

The company, formerly known as First Cobalt, plans to commission a hydrometallurgical manufacturing facility near Toronto in 2022 to refine cobalt into the ingredients that go into battery cathodes. Electra Battery Materials will use hydroelectric power from Ontario Power Generation Inc. to minimize the carbon footprint associated with refining key battery metals. The company is sourcing most cobalt from the Democratic Republic of Congo, but it is also drilling at its wholly owned Iron Creek mine in Idaho.

S&P Global Market Intelligence spoke with Electra Battery Materials President, CEO and Director Trent Mell about the company’s plans. Market Intelligence posed the final two questions by email following the interview. The following conversation has been lightly edited for clarity and length.

S&P Global Market Intelligence: What's the draw of building out a midstream battery supply chain in North America for automakers and consumers?

Trent Mell: When you get yourself in the boardroom with automakers, it really comes down to the cost of doing business and, of course, from the consumer-facing perspective, what the carbon footprint is. By having materials locally and avoiding circumnavigating the globe with your supply chain any more than you need to, you get to a point where you can lower your cost in transport, lower your carbon footprint, and also lower your costs through operating efficiencies.

The "just-in-time" global supply chain network has its drawbacks and a lot of manufacturers, not just automotive, are looking to onshore portions of their supply chain. They're discarding the traditional economic theory of global efficiencies with the view that the cost of supply chain interruptions far exceeds any efficiencies you might achieve through these international competitive advantage theories that we all studied at university.

You have said there's a lack of battery manufacturing capacity in North America, specifically for the precursor materials used in battery cathodes, a key component in lithium-ion batteries used in EVs. Can you tell us more?

The feedback that we received from the downstream supply chain — battery makers and automakers — was that there's a gaping hole in the North American battery supply chain, specifically that relates to precursor cathode active materials, or PCAM, manufacturing. The challenge there is typically when you refine your cathode materials — the dominant cathode materials being nickel, cobalt and manganese — you then need to combine the three of those in a preliminary step before it goes in the cathode of the battery. Ideally, you want to locate the PCAM manufacturing process where you're actually refining your material. The reason for that is the cobalt and the nickel product you're otherwise making has [a high] moisture content. It's just inefficient to have to crystallize it, ship it and then redissolve it once you're at a PCAM plant.

But when you look around North America, nobody is doing that PCAM step, because nobody is actually refining. Where do you put a PCAM plant if you don't have nickel and cobalt? We're stepping into that void under a four-phase process where we'll do not just nickel and cobalt production, but also battery recycling. We will then ultimately feed that to a precursor partner, which we expect to have located right up on our permitted site with us.

Are major automakers doing enough to ensure there's a stable and sustainable supply of battery materials to meet projected demand?

I think on the raw material sourcing, it's challenging. Are we doing enough? Probably not. If every automaker's projected EV penetration rates are achieved, even in part, there's just not enough material out there. The more astute teams in the market realize that and they're trying to quickly secure materials. We see it in lithium. We're starting to see it nickel. But then as you start to build out the supply chain itself, each step of the process has its own challenges. Specifically in North America, in addition to raw material sourcing, this precursor step is a real conundrum because — other than ourselves — there are no permitted sites where you could get something like this up and running in relatively short order.

At what point do you see recycled battery materials playing a significant role in the EV supply chain? What's your outlook for the next five or 10 years?

The next five years are going to be largely the recycling of consumer electronics — phones, laptops, power tools, kids toys and things of that nature. Relative to an EV, the recycled tonnage is going to be fairly modest but attractive because these portable electronics tend to have a lot more cobalt. Looking 10 years out, the market is set to grow. If all the EV adoption rates follow at a 10-year lag, you can see what the recycling market is going to look like. I know this firsthand: There are entire teams within automotive companies that are trying to figure out what their end-of-life battery strategy is going to be. They can't start putting these EVs out without a strategy. The government is not mandating that they deal with it, but if they don't figure it out, that could happen.

There's been a significant amount of technological innovations in and adoption of LFP, or lithium-iron-phosphate cathodes. This type of battery does not require nickel or cobalt. How are next-generation batteries figuring into your plans?

I think we're going to continue to see a lot of different battery cathodes out there. For LFP, the quality of that battery is getting better, but you don't get the range that you get on nickel-rich batteries, and they don't perform as well in cold weather. I still see the LFP battery, unless it gets better, relegated to the entry-level market segment, which is great because it makes EVs more affordable. The challenge with LFP is there is really nothing there to recycle. At the end of life, there's a lot of valuable material in the more expensive, quality batteries, but LFP, lithium-iron-phosphate, there's not much incentive to recycle them, other than the environmental imperative of not putting these into dumps. So, there's a bit of a paradox when it comes to LFPs and what their role could be. Tesla Inc. is looking at bringing them maybe into Europe, maybe to North America, but I just don't see that being a big part of the market. My conviction is strengthened just by the billions of dollars that are being spent building conventional, nickel-rich battery plants.

Where will Electra Battery Materials source the cobalt it plans to refine and what companies is it working with? Given concerns around human rights, safety and environmental issues associated with mining cobalt in the DRC, how is Electra ensuring the cobalt it sources is free of such abuses?

Like most of the industry, we are currently sourcing from the DRC. However, Electra Battery Materials will only buy from Glencore PLC and China Molybdenum Co. Ltd. as both companies are large operators that follow OECD [Organisation for Economic Cooperation and Development] guidelines to ensure human rights are maintained in the DRC. Electra is committed to using ethically sourced cobalt and is committed to third-party audits and verifications of our supply chain to ensure it only purchases feedstock from companies committed to strong environmental, social and governance principles and universal human rights. It is important the industry keeps human rights top of mind as we move forward in the ever-growing EV sector.